Oracle sees an on-demand world

When it comes to Oracle's on-demand software business, the normally outspoken vendor has tended to be somewhat reticent about how it defines both the scope and focus of its operation. Recently, however, the company has begun to talk more openly about software-as-a-service (SaaS), an approach that it sees as applicable to all Oracle offerings.

Earlier this month, Oracle revealed it had more than 2,200 on-demand customers representing over 1.7 million users. In its most recent financial quarter ended Aug. 31, 2006, the vendor reported that its on-demand revenue rose 48.8 percent to US$125 million compared with the year-ago quarter.

IDG News Service talked to the man who heads up Oracle's on-demand operations, Juergen Rottler, the company's executive vice president of Oracle Customer Services. An edited transcript of that conversation follows.

What's Oracle's take on on-demand software?

There's a lot of interest and hype in the marketplace around on-demand, particularly in the salesforce automation space, whether it's RightNow [Technologies] or Salesforce.com or our Siebel CRM On Demand. Oracle is the only company that can offer an overarching on-demand platform for all applications and for all business processes and for different technologies -- database and middleware -- it doesn't have to just be applications.

At last month's OpenWorld conference, Oracle Chief Executive Officer Larry Ellison described the company's on-demand business as the same size as Salesforce.com's; is that correct?

It's very hard to compare our businesses; it's a bit like an apples-to-oranges comparison. We have so many different deployment options and we don't count software licenses and support as part of on-demand revenue. I'll stick with Larry's statement from OpenWorld.

We're a very large company. As a part of Oracle, on-demand isn't a huge business, but we have a very significant interest in it.

How does your approach differ from that of, say, SAP AG, which appears to be adopting a more cautious approach to on-demand?

SAP is struggling in this space. They see it more as an on-ramp as driving users to more traditional [on-premise] software. We've been in the on-demand business for nearly seven years. It's influenced our development priorities, how we run our business and it's influenced our data centers. We really have an on-demand platform. We see partners take that platform for applications across the entire enterprise.

We have on-demand versions for all of our applications including the ones we acquired. We've a revamped release of PeopleSoft Enterprise On Demand and we have Oracle On Demand for Siebel CRM as well as Siebel CRM On Demand. We have all our retail 'on-demanded' -- Retek and ProfitLogic -- and our G-Log logistics. We're working on a Portal solution.

Who does the bulk of the hosting of your on-demand software -- Oracle or your partners -- in percentage terms?

In most cases where partners are hosting, it's because the customer already has someone to outsource their software. Depending on the geography, it's in the 20 to 30 percent range. The majority of our business is hosted out of our data centers.

Where are your data centers and do you expect to open more outside the U.S. as your on-demand operation grows?

Our most well-known data center is in Austin, Texas. Our other data centers serve as disaster recovery or back-up sites. We don't talk about them or their location a lot of time for security reasons. For local capabilities, we tend to partner. We're fortunate that we can look at all options, but we'll most likely go with partners.

How does your on-demand business look on a regional basis, is it dominated by the U.S.?

It mirrors the regional themes for broader [IT] outsourcing adoption. North America today is sort of ahead, but Europe is definitely not lagging. It's fast catching up to North America and is led by the U.K. We have a very strong business in Latin America and lots of success in Asia-Pacific anchored in Australia. Our four strongest markets are North America, the U.K., Latin America and Australia.

Is there an average size for your on-demand customers?

It ranges from a few individuals to thousands of users. In general, our on-demand customers and the number of users are growing bigger, quite a bit bigger. We're seeing great interest among Fortune 100 companies. On-demand isn't just for small to midsize businesses.

Larry Ellison is an investor in both Salesforce.com and NetSuite. Has it been useful for Oracle to observe what those on-demand companies have been doing?

Larry's been a believer in this new way of doing business for many years. He's made significant investments in us and in other on-demand companies. We believe this is a market worth developing to create a broader ecosystem. We're also a very important platform provider. Salesforce.com runs on our databases and middleware. They're a customer, NetSuite similarly. We're in competition; in other areas, but they're also customers of ours. We participate in the market in multiple ways.

Who do you see as your primary competition both now and in future?

Ultimately, it will be the same people we compete against today. SAP has been a bit unfocused and haphazard and it'll take them some years to come up to scratch. We're waiting to see if Microsoft can successfully enter the market. The rest of the competition are niche players. The challenge for them is can they broaden their products and be relevant in a broader context? We're a huge company that can provide an individual on-demand service or a multitenant solution securely; others don't have those options. Some players won't be around in future.

Oracle has yet to really talk up its on-demand business, is that likely to change?

You will see us continue to raise the noise level a little. We've had a lot of other Oracle news to cover in the past quarters. On-demand is picking up, there's a lot of activity.

What about Oracle's own internal on-demand deployments? Does the company's fondness for eating its own dog food extend to hosted software?

We look at Oracle as one big on-demand customer. There are many parts of our business running the same platform and products as our on-demand customers.

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